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In order to determine the right time lag for the Granger causality test, I applied a cross correlation function (CCF) among EU and National legislation and the CCF figure is attached. I would be grateful if you could kindly help me in resolving the following concerns:

  • I am wondering what time-lag you recommend based on the attached figure?
  • To find the greatest value in CCF figure, should I consider absolute values or just the raw values?
  • If we consider the negative values in CCF Figure, then I assume the result of Granger causality test would show the negative causality, correct?
  • I am interested in one side of the causality (Effect of EU on National and Not the vice versa), so, should I only consider the bound [-5...0]?
Gala
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user2115924
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  • You need more reputation to post images, but you are able to post data and/or printed output from the software you used, such as numeric tabulation of CCF. – Nick Cox Aug 07 '13 at 11:00
  • The OP says the figure is attached but there is no figure here. It seems to be lost during the editing. – Metrics Aug 12 '13 at 02:06

1 Answers1

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Does the lag identification procedure have to be applied using the cross correlation? If not, I would recommend the function VARselect() from the package vars in the R programming environment. This function suggests different optimal lags according to some information criteria (AIC, HQ, SC and FPE). Once you have chosen the lag, you can perform a Granger causality test using another function from the same package causality().

gung - Reinstate Monica
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user2317915
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  • What language is this and how do you know the OP is using it? – Nick Cox Aug 07 '13 at 15:59
  • The language is, of cource, R. – user2317915 Aug 07 '13 at 16:12
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    As neither R nor any other language is a declared default on this site, it is a matter of courtesy as well as information always to explain the language being used. The second half of my question remains.... – Nick Cox Aug 07 '13 at 16:15
  • I can only suggest a language I use... – user2317915 Aug 07 '13 at 16:25
  • Naturally I agree with that. However, the question is not about software, but about methods, so in principle a fair answer need not mention software at all. In practice we can't see the OP's graphs, but that's a different point. – Nick Cox Aug 07 '13 at 16:29